Setting new standards on advice

Choosing between a Volvo or a BMW, or which newspaper to buy is relatively straightforward. The method of buying seems to matter much less than what you end up with. You could argue with financial services the opposite is true; the method of buying being at least as important as what you buy. I would argue the method you use is the key to having a successful buying experience.

After 20 years of financial services experience I am still amazed at how often I see poor selling practices.

You would think that the biggest and best-known brands in financial services would be a safe bet but more often than not, they are among the worst. There is no product good enough not to be rendered useless by a poor seller or an unwise buyer. Any product if inappropriately set up, can let you down.

It’s not all bad news however! Already a massive shift in professional standards has taken place. The financial advisory world, particularly at the proper planning end of the market, has upped its game and big improvements come into force next year.

Then all independent financial advisers (IFAs) must meet minimum qualification standards and offer much greater fee transparency. You will see a newly invigorated IFA sector which, even at the lower end, will offer a much more valuable and professional service. The higher end – certified and chartered financial planners – will prosper as consumer awareness increases as their brand(s) feature more and more in the quality press.

Reaching these standards has been a challenge for many IFA firms and those that are unable (or unwilling) to do so will leave the profession or seek authorisation at a lower level.

Consumers dealing with these junior levels will need to be careful to avoid the salesman-pretending-to-be-adviser approach that Panorama and Watchdog-type investigations keep exposing. More than ever, consumers will need to spend time selecting the right buying method.

Going forward there should be a two-tier market; at the more basic level the introduction of the National Employment Savings Trust, which will offer valuable pension scheme membership for nearly all of the UK’s workforce, and at-work ISA collection will offer the means for providing for your own and your family’s security.

Those with more complex requirements will benefit from face-to-face advice and undoubtedly the IFA brand will be the obvious choice.

Individuals can now expect proper strategic planning from their IFA and this where the real value can be added. Increasingly clients want to know the answers to the really important questions – am I still OK, can we afford to carry on our current lifestyle without the fear of running out of money, how much will I need to be financially independent?

When clients first come and see us this is what they want. They may not know it at first as they often have another issue they want resolved, but once you dig deeper their concerns and desires become more apparent to them and us.

This leads to conversations about themselves and their families and how they can achieve all the things that are important to them. Talking about products, while still important, becomes secondary.

Still too much focus exists on the selling and discussing of financial products. In time this will change and genuine financial planning will become available to a much wider audience.

At this time of year, New Year resolutions are there to be made (and broken) but employing a properly qualified financial planner who genuinely engages with you, is a resolution that is worth keeping.